Resolution of the Board of the National Bank of the Kyrgyz Republic No. 53/8 of September 16, 2015 on Amendments to Certain Resolutions of the Board of the National Bank of the Kyrgyz Republic

NATIONAL BANK OF THE KYRGYZ REPUBLIC

RESOLUTION

of September 16, 2015 No. 53/8

On Amendments to Certain Resolutions of the Board of the National Bank of the Kyrgyz Republic

In accordance with Articles 7 and 43 of the Law "On the National Bank of the Kyrgyz Republic", the Board of the National Bank of the Kyrgyz Republic

RESOLVES:

1. To make amendments to the following resolutions of the Board of the National Bank of the Kyrgyz Republic (attached):

• "On Approval of the "Instruction on the Procedure for Observing Limits of Open Currency Positions by Microfinance Companies" dated May 30, 2014 No. 24/8;

• "On Approval of the "Instruction on the Procedure for Observing Limits of Open Currency Positions by Credit Unions" dated May 30, 2014 No. 24/9.

2. This Resolution shall enter into force upon the expiration of fifteen days from the day of its official publication.

3. The Legal Department:

• publish this Resolution on the official website of the National Bank of the Kyrgyz Republic;

• after official publication, send this Resolution to the Ministry of Justice of the Kyrgyz Republic for inclusion in the State Register of Regulatory Legal Acts of the Kyrgyz Republic.

4. The Supervision and Licensing Methodology Department shall bring this Resolution to the attention of the Non-Commercial Partnership "Association for the Development of Islamic Economy, Finance and Industry", the Association of Microfinance Organizations, microfinance organizations, the Association of Credit Unions, credit unions, CJSC "EcoIslamicBank", and LLC "Barakat".

5. Control over the implementation of this Resolution shall be entrusted to the Deputy Chairman of the National Bank L.Dzh.Orozbayeva.

Chairman	T. Abdygulov

Amendments to Certain Resolutions of the Board of the National Bank of the Kyrgyz Republic

1. To make the following amendments to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the "Instruction on the Procedure for Observing Limits of Open Currency Positions by Microfinance Companies" dated May 30, 2014 No. 24/8:

in the "Instruction on the Procedure for Observing Limits of Open Currency Positions by Microfinance Companies" approved by the aforementioned Resolution:

• in paragraph 1, after the words "microfinance companies", add the words ", including those carrying out operations in accordance with Islamic principles of banking and financing, taking into account the requirements of Sharia standards and the special terminology applied by them in carrying out banking operations";

• supplement paragraph 2 with the following paragraph:

"Microfinance companies (MFCs) carrying out operations in accordance with Islamic principles of banking and financing must additionally be guided by the Sharia standards approved by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).";

• supplement paragraph 15 with the following paragraph:

"MFCs carrying out operations in accordance with Islamic principles of banking and financing within the framework of an 'Islamic window', carrying out foreign currency operations based on a license from the National Bank and attracting funds, daily by 9:00 submit to the National Bank, and those located in other regions of the republic - to the corresponding regional department, the Representation of the National Bank in the Batken Region, on paper and electronic media the following reports on open currency positions: for operations carried out in accordance with Islamic principles of banking and financing; for operations other than those carried out in accordance with Islamic principles of banking and financing; a summary report on all MFC operations in foreign currency.";

• supplement paragraph 16 with the following paragraph:

"MFCs carrying out operations in accordance with Islamic principles of banking and financing within the framework of an 'Islamic window', carrying out foreign currency operations based on a license from the National Bank and not attracting funds, on the first working day following the reporting week, by 9:00 submit to the National Bank, and those located in other regions of the republic - to the corresponding regional department, the Representation of the National Bank in the Batken Region, on paper and electronic media the following weekly reports on open currency positions: for operations carried out in accordance with Islamic principles of banking and financing; for operations other than those carried out in accordance with Islamic principles of banking and financing; a summary report on all MFC operations in foreign currency.";

• supplement the "Instruction" with Section 7 of the following content:

"7. Features of Currency Operations of MFCs Carrying Out Operations in Accordance with Islamic Principles of Banking and Financing

24. MFCs have the right to carry out transactions for the purchase and sale of foreign currency provided they comply with the following Sharia standards rules:

• both parties must have the currency to be exchanged for the opposite currency available before making the exchange;

• the units of currency exchanged must be of the same value, even if one is a banknote and the other is a coin of the same country;

• the currency contract must not include conditions or stipulations regarding the postponement of the transfer of one or both units of exchange;

• currency operations must not be carried out on futures and forward markets.

25. Parallel purchase and sale of currency is not permitted, as it involves one of the following factors:

• there is no transfer and receipt of the two purchased and sold currencies, which leads the contract to a postponement of the sale of currency;

• the contract for the sale of currency becomes dependent on another contract for the sale of currency;

• it leads to a bilateral mandatory obligation of both parties to exchange currency, which itself is not permitted.

26. The policies, procedures, and standard contracts of MFCs for carrying out foreign currency operations must be approved by the Sharia Council.".

27. To make the following amendments to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the "Instruction on the Procedure for Observing Limits of Open Currency Positions by Credit Unions" dated May 30, 2014 No. 24/9:

in the "Instruction on the Procedure for Observing Limits of Open Currency Positions by Credit Unions" approved by the aforementioned Resolution:

• in paragraph 1, after the words "in the activities of credit unions", add the words ", including those carrying out operations in accordance with Islamic principles of banking and financing, taking into account the requirements of Sharia standards and the special terminology applied by them in carrying out banking operations";

• supplement paragraph 2 with the following paragraph:

"Credit Unions (CUs) carrying out operations in accordance with Islamic principles of banking and financing must additionally be guided by the Sharia standards approved by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).";

• supplement paragraph 15 with the following paragraph:

"CUs carrying out operations in accordance with Islamic principles of banking and financing within the framework of an 'Islamic window', on the first working day following the reporting week, by 9:00 submit to the National Bank, and those located in other regions of the republic - to the corresponding regional department, the Representation of the National Bank in the Batken Region, on paper and electronic media the following reports on open currency positions: for operations carried out in accordance with Islamic principles of banking and financing; for operations other than those carried out in accordance with Islamic principles of banking and financing; a summary report on all CU operations in foreign currency.";

• supplement the "Instruction" with Section 7 of the following content:

"7. Features of Currency Operations of CUs Carrying Out Operations in Accordance with Islamic Principles of Banking and Financing

23. CUs have the right to carry out transactions for the purchase and sale of foreign currency provided they comply with the following Sharia standards rules:

• both parties must have the currency to be exchanged for the opposite currency available before making the exchange;

• the units of currency exchanged must be of the same value, even if one is a banknote and the other is a coin of the same country;

• the currency contract must not include conditions or stipulations regarding the postponement of the transfer of one or both units of exchange;

• currency operations must not be carried out on futures and forward markets.

24. Parallel purchase and sale of currency is not permitted, as it involves one of the following factors:

• there is no transfer and receipt of the two purchased and sold currencies, which leads the contract to a postponement of the sale of currency;

• the contract for the sale of currency becomes dependent on another contract for the sale of currency;

• it leads to a bilateral mandatory obligation of both parties to exchange currency, which itself is not permitted.

25. The policies, procedures, and standard contracts of CUs for carrying out foreign currency operations must be approved by the Sharia Council.".